Commercial Law: Distinguishing property from possession

As legal practitioners, law students and even normal everyday people in different professions and spheres of life, we have always heard the cliché in law that “possession is 9/10 of ownership”. However, this has created a kind of confusion in differentiating and distinguishing between the two concepts of commercial law. Though they might look very similar, but in reality they differ. This article seeks to clarify the apparent misunderstanding or confusion regarding the two terms.

Section 62 of the Sale of Goods Act 1893 (which is still in force in Nigeria) defines the term “property” as meaning “the general property in goods, and not merely special property”.

From the above definition, it is clear that property in goods refers to the ownership of the title to the goods and not just special property. That is to say, an owner might have the title to the goods and not the physical possession of the goods. Thus, conversely, possession refers to having physical custody and control of the goods. Consequently, the transfer of property in goods is different from the transfer of possession of the goods. Let’s take for example a bailment situation whereby a car has been taken to a garage for repairs where the possession of the car is transferred to the mechanic at the garage while the property in the vehicle still remains with the owner who sent the car to the garage for repairs. The owner still has title to the car even though he has parted with possession. It is noteworthy that it is possible for a third party to have possession of good/goods when property in the goods has been passed from a seller to a buyer. This could occur where a carrier was contracted to convey the goods from the seller to the buyer.

There are two crucial factors which underline the difference between property and possession. These are risk and remedies. They deserve specific consideration.

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Risk

The risk associated with ownership of goods generally passes with property. The implication is that immediately the buyer acquires possession and property in goods any damage that happens to the goods will be borne by him (the buyer). This situation may be contrasted with cases where a party merely has possession of the goods, as is the case in hire-purchase transactions where during the period of hire when the hirer is given possession of the goods, the owner still retains the property in the goods. Consequently, he bears the risk in case of any damage to the goods until such a time when property in the goods passes to the hirer when he exercises his option to purchase the goods. Thus, when only possession passes risk still rests with the owner and damages will be borne by him, except where the damage occurred as a result of the carelessness of the party in possession.

Remedies

There are some remedies which are available to the owner of goods. These are best illustrated using the case of an unpaid seller. In this situation, even though property would have passed to the buyer, the seller has some remedies. He can sue for the price of the goods. He can exercise a lien on the goods; that is to say, he detains/retains the goods until some conditions are fulfilled by the buyer. Furthermore, an unpaid seller can stop the goods in transit (stoppage in transit). In this case, even though the goods are no longer in unpaid seller’s possession, he could issue a countermanding order to stop the goods from being delivered to the buyer. In addition, an unpaid seller can exercise a right of resale of the goods. However, in situations where only possession has passed and a breach occurs, the owner can sue for detinue or conversion, as the case may be. For example, if a mechanic in a garage converts a car brought in for repairs into a taxi-cab for his use and benefits, the owner of the vehicle can maintain an action in conversion.

Conclusion

It is hoped that this article has clarified the misunderstanding or confusion regarding property in goods and possession of goods. It has been established that possession alone does not confer title to property. It is possible to be in possession of goods without the property in the goods vesting on such a person. Consequently, it may be asserted that the notorious cliché that “possession is 9/10 of ownership”, it is contended, gives the “9” to the popular belief that the person seen with possession is the owner of the good, while the remaining “1” is given to the law to prove who exactly has the title to, and ownership of, the goods.

Property or possesion: The article is understandable but as concerns hire purchase, does it mean that the owner bears liability for extra damages caused to the subject matter by the hirer that is not covered by insurance?..Igwe Philipa

@ phillipa, section 8 (2) of the hire purchase act shows that where a hirer refuses to take reasonable care of the goods he shall be liable to pay damages. So in your example the hirer will be liable, hope its clear :). @ All thanks,GRACIAS.

As enshrined in the HPA, when certain due processes are improperly observed, they can render the agreement void ab initio. If any of such was absent throughout the period of the agreement and yet the hirer having paid all the instalments, exercises his option to purchase the goods, will property pass validly, can a party legally and technically later recover goods from the other in this situation, even though the said ‘contract’ has ended?

In the event of frustration not occasioned by either party default in a HP transaction, where the good (e.g motor vehicle) is snatched from the hirer by armed bandits and the hirer has not paid up the minimum payment liability and decides to terminate the transaction, who bears the liability? _ Sample

In line with one of the crucial factors which underlines the differences between property and possession stated by Praise, which is” Risk”. In addition it is important to note that, unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not. That is to say Risk go along side with property.

@Sample in an event of frustration in a hire purchase agreement the agreement will be terminated with no further obligations from both parties as far as it wasn’t a result of the hirer’s negligence. So no need for the hirer to complete minimal payment. @walter that’s true